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Against a backdrop of continuing political tensions and uncertainty, BMIs position on economic activity in Bahrain was corroborated by the country statistical agency, with both positions showing a sharp slowdown in 2011. With real GDP expanding only 0.7% y-o-y in Q211, this marked the sixth consecutive quarter that growth has slowed in y-o-y terms and does little to help boost Bahrains auto market, which requires sharp growth to expand it beyond its relatively small size. BMI expects to see total vehicle sales increase modestly by 2.73% to 49,157 units in 2011, outpacing a 1.95% growth in sales to 47,850 units in the previous year. We forecast an increase of 4.04% in the value of the local auto market to BHD354.9mn (US$943.8mn) in 2011, against almost double the growth seen in the previous year.

Conversely, BMI does not see auto export volumes climbing significantly in 2011, with a negligible increase of just 0.85% to 1,877 units. Our calculations show that the value of Bahraini auto exports will grow by 2.69% to BHD14.5mn (US$38.6mn) for the year, remaining largely flat to 2010. Although naturally far larger, Bahrains vehicle imports will similarly see muted growth of 1.83% to 48,980 in 2011, while import value will edge up by 4.12% to BHD371.3mn (US$987.6mn).

While BMI expects modest growth in vehicle sales by over 10,000 units by 2016 from 2011, this modest growth remains in contrast to stagnant exports and small increases in imports over the period. The steady climb in sales over the next five years will enable Bahrain to break the 50,000-unit mark in 2012 and almost break the 60,000 mark in 2016. By the end of the forecast period in 2016 we expect imports to reach 1,955 units for a total value of BHD16.4mn (US$43.6mn). The growth in vehicle exports will be somewhat faster, almost reaching 2% by the end of the period when it will hit BHD452.8mn (US$1.2bn).

Although dealership activity on the ground was unusually muted in the final quarter of 2011, Euro Motors launched the Rolls Royce Ghost Extended Wheelbase model in November 2011, as well as the Range Rover Evoque at the 3rd Bahrain International Motor Show in the same month. The company also introduced Ferraris new FF model at the end of October 2011, the manufacturers first four-seat and four-wheel-drive car. About two weeks earlier in the same month, the company launched two new BMW models in the country, including the BMW 6 Series Coupé and the first-ever MINI Coupé. The companys general manager said that the initial response to the two models had been positive. Ebrahim K Kanoo introduced the new 2012 Toyota Hilux pickup and the new 2012 Toyota Fortuner highperformance SUV models to Bahrain in October 2011.

In terms of Bahrains wider economy, we are happy to stick to our projections, which see real GDP expanding 1.4% in 2012. In the near term, growth will be supported by a combination of fiscal stimulus (the government has announced a 44% increase in spending this year) and external assistance from key regional allies such as Saudi Arabia.

Politically, however, our relatively bleak outlook on Bahrains domestic political environment has been reinforced in the aftermath of by-elections for 18 parliamentary seats on September 24 2011. The lowerthan- expected voter turnout is both symptomatic of the populations apathy towards reforms proposed by the government aimed at quelling anti-regime demonstrations, in addition to the growing clout of the main Shia opposition party al-Wefaq. Without the latters participation in the political process, a swift resolution to the ongoing crisis remains off the table.